Welcome to the World of Marketing: Create and Deliver Value Chapter One

© 2012 Pearson Education, Inc. publishing as Prentice-Hall. 1-2 Chapter Objectives  Understand who marketers are, where they work, and marketing’s role in the firm  Explain what marketing is and how it provides value to everyone involved in the marketing process  Explain the evolution of the marketing concept  Understand the range of services and goods that organizations market  Understand value from the perspectives of customers, producers, and society  Explain the basics of market planning and the marketing mix tools we use in the marketing process

© 2012 Pearson Education, Inc. publishing as Prentice-Hall. 1-3 Real People, Real Choices: Decision Time at Pandora  Which option should be pursued? Option 1: Launch an ad campaign on radio stations, in music magazines, and at record stores Option 1: Launch an ad campaign on radio stations, in music magazines, and at record stores Option 2: Build buzz about Pandora through word of mouth Option 2: Build buzz about Pandora through word of mouth Option 3: Sell the service to a large chain of record stores, a music magazine, or even a record label. Option 3: Sell the service to a large chain of record stores, a music magazine, or even a record label.

© 2012 Pearson Education, Inc. publishing as Prentice-Hall. 1-4 Welcome to “Brand You”  You are a product and have “market value” as a person  You “position” yourself for a job interview in a number of ways

© 2012 Pearson Education, Inc. publishing as Prentice-Hall. 1-5 The Who and Where of Marketing  Marketers: Come from many different backgrounds Come from many different backgrounds Work in many locations Work in many locations Maintain cross-functional relationships within the firm Maintain cross-functional relationships within the firm Enjoy exciting, diverse careers Enjoy exciting, diverse careers Get the scoop on marketing salaries! Visit the Occupational Outlook Handbook!marketing salaries Occupational Outlook Handbook

© 2012 Pearson Education, Inc. publishing as Prentice-Hall. 1-6 The Value of Marketing  Definition of Marketing (AMA, 2007) Marketing is the activity, set of institutions, and processes for creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners, and society at large. Marketing is the activity, set of institutions, and processes for creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners, and society at large.

© 2012 Pearson Education, Inc. publishing as Prentice-Hall. 1-7 Marketing Meets Needs  Marketing meets the needs of diverse stakeholders Stakeholders are buyers, sellers, investors, community residents, citizens, consumers Stakeholders are buyers, sellers, investors, community residents, citizens, consumers  Marketing concept Identifying and satisfying consumer needs to ensure long-term profitability Identifying and satisfying consumer needs to ensure long-term profitability

© 2012 Pearson Education, Inc. publishing as Prentice-Hall. 1-8 Needs, Wants, and Benefits   Needs Can be physical or psychological   Benefits Outcome sought by consumer that satisfies need or want and motivates buying behavior   Want Desire to satisfy needs in specific ways   Demand Customers’ desires for products coupled with the resources needed to obtain them

© 2012 Pearson Education, Inc. publishing as Prentice-Hall. 1-9 Marketing Meets Needs  The modern marketplace Takes many forms, including a mall, eBay auction, e-commerce Web site Takes many forms, including a mall, eBay auction, e-commerce Web site

© 2012 Pearson Education, Inc. publishing as Prentice-Hall Marketing Creates Utility  Utility: The sum of the benefits we receive from using a product/service Form utility Form utility Place utility Place utility Time utility Time utility Possession utility Possession utility

© 2012 Pearson Education, Inc. publishing as Prentice-Hall Place Utility Rent the Runway is a new service that rents high-end dresses from fashion designers and rents them at a one-tenth of the cost of buying the same garment in the store. Rent the Runway

© 2012 Pearson Education, Inc. publishing as Prentice-Hall Marketing and Exchange  An exchange occurs when something is obtained for something else in return, like cash for goods or services Buyer receives an object, service, or idea that satisfies a need Buyer receives an object, service, or idea that satisfies a need Seller receives something of equivalent value Seller receives something of equivalent value

© 2012 Pearson Education, Inc. publishing as Prentice-Hall The Evolution of Marketing  The Production Era Production orientation Production orientation  The Sales Era Selling orientation Selling orientation  The Relationship Era Consumer orientation Consumer orientation Total quality management Total quality management  The Triple Bottom Line Era

© 2012 Pearson Education, Inc. publishing as Prentice-Hall The Production Era  Dominated by production orientation: A management philosophy that emphasizes the most efficient ways to produce and distribute products A management philosophy that emphasizes the most efficient ways to produce and distribute products  Marketing played an insignificant role  Henry Ford’s Model T and Ivory soap are examples of products that were created under a production orientation

© 2012 Pearson Education, Inc. publishing as Prentice-Hall The Selling Era  When product availability exceeds demand, businesses may focus on a one-time sales of goods rather than repeat business  Dominated by selling orientation: Managerial view of marketing as a sales function, or a way to move products out of warehouses to reduce inventory Managerial view of marketing as a sales function, or a way to move products out of warehouses to reduce inventory

© 2012 Pearson Education, Inc. publishing as Prentice-Hall The Relationship Era  Focused on a customer orientation: A management philosophy that emphasizes satisfying customers’ needs and wants A management philosophy that emphasizes satisfying customers’ needs and wants  Marketing becomes more important in the firm  Total Quality Management (TQM) is widely followed in the marketing community

© 2012 Pearson Education, Inc. publishing as Prentice-Hall The Triple Bottom Line Era: Make Money and a Contribution  Focuses on building long-term bonds with customers Triple orientation seeks to maximize the financial, social, and environmental bottom lines Triple orientation seeks to maximize the financial, social, and environmental bottom lines This ad focuses on the environmental bottom line

© 2012 Pearson Education, Inc. publishing as Prentice-Hall The Triple Bottom Line Era: Make Money and a Contribution  Marketing uses customer relationship management (CRM) CRM involves systematically tracking consumers’ needs in ways that also benefit society and delivers profit to the firm CRM involves systematically tracking consumers’ needs in ways that also benefit society and delivers profit to the firm  Social marketing concept: Management philosophy that marketers must satisfy customers’ needs in ways that also benefit society and deliver value to the firm Management philosophy that marketers must satisfy customers’ needs in ways that also benefit society and deliver value to the firm

© 2012 Pearson Education, Inc. publishing as Prentice-Hall The Triple Bottom Line Era: Make Money and a Contribution  Sustainability: Creating products that meet present needs and ensuring that future generations can have their needs met Creating products that meet present needs and ensuring that future generations can have their needs met Green marketing is one type of sustainable business practice Green marketing is one type of sustainable business practice  ROI measures value

© 2012 Pearson Education, Inc. publishing as Prentice-Hall Green Marketing in Action Green marketing is practiced by many forward-thinking firms today. Visit Ads of the World to see examples of Volkswagen’s green marketing and sustainable business practicesgreen marketing sustainable business practices

© 2012 Pearson Education, Inc. publishing as Prentice-Hall What Can Be Marketed?  From “serious” goods and services to fun things Products mirror changes in popular culture Products mirror changes in popular culture Marketing messages often communicate myths Marketing messages often communicate myths

© 2012 Pearson Education, Inc. publishing as Prentice-Hall What Can Be Marketed?  Product: any good, service, or idea Consumer goods/services Consumer goods/services Business-to-business goods/services Business-to-business goods/services Not-for-profit marketing Not-for-profit marketing Idea, place, and people marketing Idea, place, and people marketing Linked in Linked in

© 2012 Pearson Education, Inc. publishing as Prentice-Hall The Marketing of Value  Value: The benefits a customer receives from buying a good or service The benefits a customer receives from buying a good or service  Marketing communicates the value proposition: A marketplace offering that fairly and accurately sums up the value that the customer will realize if he/she purchases product/service A marketplace offering that fairly and accurately sums up the value that the customer will realize if he/she purchases product/service

© 2012 Pearson Education, Inc. publishing as Prentice-Hall Value from the Customer’s Perspective  Customer perspective: Value is the ratio of costs (price) to benefits (utilities) Value is the ratio of costs (price) to benefits (utilities) Value proposition includes the whole bundle of benefits the firm promises to deliver, not just the benefits of the product itself Value proposition includes the whole bundle of benefits the firm promises to deliver, not just the benefits of the product itself  Discussion

© 2012 Pearson Education, Inc. publishing as Prentice-Hall Value from the Seller’s Perspective  Value for the seller takes many forms  Seller’s should build value by marketing with customers, not to them Partnering with customers via brandfests Partnering with customers via brandfests  Customers have value – it is more expensive to attract new customers than to retain current ones

© 2012 Pearson Education, Inc. publishing as Prentice-Hall  Lifetime value of a customer Calculating the projected profit from a particular customer allows a firm Calculating the projected profit from a particular customer allows a firm  Creating a competitive advantage Identification of a distinctive competency Identification of a distinctive competency Turning distinctive competencies into differential benefits Turning distinctive competencies into differential benefits  Examples?? Value from the Seller’s Perspective Pandora Video

© 2012 Pearson Education, Inc. publishing as Prentice-Hall It’s Debatable Class Discussion Question Does this product provide a differential benefit that is important to consumers? Are the benefits provided to consumers unique and superior to those offered by the competition, and if so, is this competitive advantage sustainable?

© 2012 Pearson Education, Inc. publishing as Prentice-Hall Figure 1.1 A Value Chain for the Apple iPod

© 2012 Pearson Education, Inc. publishing as Prentice-Hall Figure 1.2 Steps in the Value Chain

© 2012 Pearson Education, Inc. publishing as Prentice-Hall Table 1.3 An Example of a Customer Service Scorecard

© 2012 Pearson Education, Inc. publishing as Prentice-Hall Consumer-Generated Value: From Audience to Community  Everyday people are generating value instead of just buying it  Social networking continues to grow and leverages Web 2.0  Open source business models are on the rise.

© 2012 Pearson Education, Inc. publishing as Prentice-Hall Value from Society’s Perspective  Marketing transactions add or subtract value from society Stressing socially responsible and ethical decisions is good business Stressing socially responsible and ethical decisions is good business Marketing is often criticized Marketing is often criticized Marketing’s dark side Marketing’s dark side

© 2012 Pearson Education, Inc. publishing as Prentice-Hall Marketing Is a Process  Marketing planning is a major portion of the process and involves: Analyzing the marketing environment Analyzing the marketing environment Developing a marketing plan Developing a marketing plan Deciding on a market segment Deciding on a market segment Choosing the marketing mix— product, price, promotion, and place Choosing the marketing mix— product, price, promotion, and place

© 2012 Pearson Education, Inc. publishing as Prentice-Hall Figure 1.3 The Marketing Mix

© 2012 Pearson Education, Inc. publishing as Prentice-Hall Real People, Real Choices: Decision Made at Pandora  Joe chose option 2 Implementation: Pandora chose personal communication to build awareness. Town halls were led by the firm’s founder; , blogs, tweets, and Facebook were also instrumental. Listeners wore branded merchandise. Service was made available on as many devices as possible Implementation: Pandora chose personal communication to build awareness. Town halls were led by the firm’s founder; , blogs, tweets, and Facebook were also instrumental. Listeners wore branded merchandise. Service was made available on as many devices as possible Measuring Success: As of mid-2010, Pandora boasted 50 million listeners Measuring Success: As of mid-2010, Pandora boasted 50 million listeners

© 2012 Pearson Education, Inc. publishing as Prentice-Hall Keeping It Real: Fast-Forward to Next Class Decision Time at First Flavor  Meet Jay of First Flavor  First Flavor markets edible film strips that allow users to taste flavors. Other potential uses of film strips beyond sampling are being investigated  The decision to be made: Whether or not to diversify into new product categories

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